Sydney 'unequivocally' in housing bubble: Treasury chief

A house with a 'For Sale/Sold' sign in Sydney. Source: AAP

Treasury secretary John Fraser has warned that Sydney is "unequivocally" in a housing bubble, and raised concerns about the amount of money being poured into the housing market with interest rates so low.

Treasury secretary John Fraser has warned that Sydney is "unequivocally" in a housing bubble, and raised concerns about the amount of money being poured into the housing market with interest rates so low.

"When you look at the housing price bubble evidence, it's unequivocally the case in Sydney. Unequivocally".

"When you look at the housing price bubble evidence, it's unequivocally the case in Sydney. Unequivocally," Mr Fraser told a Senate committee. 

"Frankly, whatever the data says, just casual observation can tell you it's the case."

He says the same applied to parts of Melbourne, while for the rest of Australia evidence of a bubble was "less compelling". 

"Certainly I think that's the case in the higher priced areas of Melbourne, and I base that on my own observation as well as the data" he said.

Mr Fraser told a Senate committee he is concerned about the size of investment in property buying as well as restoration projects.

"Frankly, whatever the data says, just casual observation can tell you it's the case."

"It does worry me that the historically low level of interest rates are encouraging people to perhaps over invest in housing," Mr Fraser said.

Asked in Question Time, whether he agreed with Mr Fraser, Mr Abbott said "I want housing to be affordable, but nevertheless I also want house prices to be modestly increasing". 

"As someone who, along with the bank, owns the house in Sydney, I do hope that our housing prices are increasing," the PM told Parliament.

The issue of a possible housing bubble was discussed during Question Time as the latest CoreLogic RP Data home value index showed home values across the nation dipped in May for the first time in six months. 

Median values across all the capital cities dropped 0.9 per cent in the month, with falls recorded everywhere except Darwin and Canberra, the latest CoreLogic RP Data home value index shows.

Its measure of Sydney home values fell 0.7 per cent in May, Melbourne's dropped 1.7 per cent, and Hobart took the sharpest fall, with values down 2.7 per cent.

The figures, which are based on the value of all homes whether they are on the market or not, came as Treasury boss John Fraser warned of a housing bubble in Sydney and parts of Melbourne.

While CoreLogic RP Data's value index fell for most capital cities, sale prices in Sydney and Melbourne continued to rise in May, taking median prices in Sydney past $750,000.

CoreLogic RP Data's head of research Tim Lawless said the falls in value were a natural correction after months of strong growth, but are not expected to last.

Record low interest rates and a well-received federal budget are likely to continue to drive buyer interest, he said.

"Other market indicators are also pointing to stronger conditions for the Sydney and Melbourne housing markets, with auction clearance rates remaining at or close to record highs throughout May, along with low advertised stock levels across the largest cities, particularly for Sydney," Mr Lawless said.

Even with May's value dip, Sydney's booming property market added 15 per cent in the past 12 months, while Melbourne homes are nine per cent higher.

Conditions on all other capital cities are far more subdued, and values in Darwin and Hobart have fallen two per cent and one per cent respectively in that period.

MEDIAN HOME VALUES IN MAY, AND MEDIAN SALE PRICES

* Hobart, down 2.7pct, $328,000
* Melbourne, down 1.7pct, $569,500
* Brisbane, down 0.8pct, $463,000
* Sydney, down 0.7pct, $752,000
* Perth, down 0.5pct, $510,000
* Adelaide, down 0.2pct, $400,000
* Darwin, up 0.6pct, $520,000
* Canberra, up 1.4pct, $549,000
Source: RP Data

-With AAP

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